The SGV's industrial market is hot

Pasadena Star News

By: Cynthia Kurtz

Posted: 12/17/2014 

The industrial market in the San Gabriel Valley is hot. According to a special Real Estate Report written by Karen Klein for the Los Angeles Business Journal in April, in the first quarter of 2014 the SGV “outperformed every other regional market in Southern California” for industrial properties. And since then it has only gotten better.

There were 131 million square feet of industrial space available and an additional 628,000 square feet under construction in the first quarter of 2014. Buyers were looking for older small and midsize buildings - ranging from 10,000 square feet to 200,000 square feet - primarily for import-export distribution warehouses. 

The Kyser Center for Economic Research at the Los Angeles Economic Development Corporation reported that container traffic at the Los Angeles and Long Beach Ports increased 3.0 percent last year and gained an additional 4.8 percent by the end of October 2014. That means more importing and exporting and more demand for these facilities.

The growth in activity at the Ports is also increasing transportation and warehousing employment. A reported 2,200 jobs had been added in Los Angeles County year to year as of October 31, 2014.  The San Gabriel Valley is a big winner as the SGV has a high concentration of jobs related to international trade - 6.7 percent of jobs in the SGV compared to 5.3 percent in Los Angeles County.

The San Gabriel Valley’s available inventory for industrial facilities opened up last year after the California Legislature eliminated redevelopment forcing cities to sell properties that redevelopment agencies had owned.

By March 2014, the SGV vacancy rate for industrial properties in the SGV had dropped to 3.5 percent, far below the almost 7 percent from two years ago and a full percentage point below Los Angeles County’s average rate of 4.5 percent.

According to the Colliers International Report, in the first quarter of 2014, 1,220,000 of industrial space in the SGV traded hands. In the second quarter the number increased to 2,185,700 sq. feet. Lease prices steadily grew as inventory became tighter. SGV rents averaged $0.46 per sq. foot in the first quarter and moved to $0.49 per sq. foot and $0.54 per sq. foot in the second and third quarters.

Activity in the industrial sector was also influenced positively by an easing of lending standards for commercial and industrial loans according to the Federal Reserve’s October 2014 Senior Loan Officer Survey on Lending Practices.

The fourth quarter looks like it will continue this strong growth. The Real Estate Rama - a newsletter on government and real estate - reported that four SGV industrial properties totaling over 49,000 sq. feet with a total value of $4.8 million were sold or leased in November. Two of the properties were in Irwindale and two in Azusa. Two of the properties will be used for machine shop operations, a third for warehousing, and the fourth, which had previously been vacant, will become an asphalt/striping facility. If the trend continues, it will mark the 17th consecutive quarter of positive net absorption for SGV industrial properties.

This is quite a turnaround from 2008 when industrial facility projects were stopping in mid-construction as demand drop dramatically. The new numbers are a great indicator for positive job growth in 2015.